Online marketplaces could create around 3 million new jobs by 2025 across Africa. These digital platforms, which match buyers and providers of goods and services, could also raise incomes and boost inclusive economic growth with minimal disruption to existing businesses and workforce norms, new research discloses.
These are among the findings of a new report, titled How Online Marketplaces Can Power Employment in Africa, released Thursday, 28 March, 2019 by Boston Consulting Group (BCG).
Generating employment is an urgent priority across the continent. The African Development Bank estimates that one-third of the 420 million Africans age 15 through 35 were unemployed as of 2015. Around 58% of the new jobs created directly, indirectly, and through the additional economic activity generated by online marketplaces will be in the consumer goods sector, 18% will be in mobility services, and 9% in the travel and hospitality sector, according to the report.
However, for online marketplaces to attain their full potential, the public and private sectors must work together to build the right digital environment from the outset, the report notes.
Obstacles to industry expansion include underdeveloped infrastructure, a lack of regulatory clarity, and limited market access. For their part, African policymakers are concerned about issues such as data security and potential disruption to traditional business sectors.
The Economic and Social Benefits of Online Marketplaces
“Online marketplaces are a good illustration of how the digital revolution can create economic opportunity and improve social welfare in Africa,” said Patrick Dupoux, a senior BCG partner who leads the firm’s Africa business.
He affirms, “Because Africa currently lacks an efficient distribution infrastructure, online marketplaces could create millions of jobs.”
For instance, in Nigeria , 71% of workers are self-employed and another 9% contribute labor as family members.
The report also details the ways in which economic activity generated by online marketplaces boosts employment and incomes.
“These businesses create demand for personnel in new fields, such as platform development, as well as for merchants, marketers, craftspeople, drivers, logistics clerks, and hospitality staff. Some also offer skills-development programs and help small enterprises raise capital to expand their businesses.
Online marketplaces also boost demand for goods and services in areas currently beyond the reach of conventional retail networks and bring new people, such as women and youth who may be currently excluded from labor markets into the workforce.
“While online marketplaces are often seen as disruptive forces in advanced economies, in Africa’s less-structured economics they can be tremendous catalysts of economic development,” said Lisa Livers a BCG partner and co-author of the report.
"We meet Kenyan SMEs on a daily basis with great products, but who struggle to scale their businesses for lack of capital. Growing in the offline world means more shops & more stock - which takes working capital’,” said Jumia Kenya Managing Director Sam Chappatte, adding that “Online marketplaces allow these entrepreneurs to both reach new customers without additional investment & build up a digital sales history that can be used to unlock finance at a future point”.
The report recommends that the online marketplace community and African governments collaborate to address the challenges that hinder the online marketplaces’ ability to grow. Both industry and government should take actions that foster a mutual understanding of
“Fulfilling the tremendous promise of online marketplaces relies on the ability of the private and public sectors to come together to create the right digital environment that is designed from the outset to bring economic and social benefits for all,” said Amane Dannouni, a BCG principal and co-author of the report.
